Estradiol and progesterone biosynthesis are stimulated and inhibited, respectively, during the follicular phase of the cycle, but the mechanisms underlying this physiologically important differential regulation are unknown. The role of FSH in stimulating estradiol production by granulosa cells is well established, and it has been proposed that a yet to be identified "luteinizing inhibitor" is needed to inhibit FSH-induced progesterone production. In preliminary studies, we made three novel findings: 1) a bone Morphogenetic Protein (BMP) system replete with ligands, receptors, and biological responses is present in rat ovaries; 2) BMPs (BMP-4 and -7) stimulate estradiol but inhibit progesterone accumulation in primary cultures of rat granulosa cells in the presence of FSH, suggesting BMPs may be the long sought "luteinizing inhibitor"; and 3) follistatin can block BMP action by forming an inactive trimeric complex of follistatin, BMP and type IA BMP receptor, suggesting that follistatin, which is known to be strongly expressed in dominant follicles, may exert an antagonistic effect on BMP function in the ovary. To investigate the role of BMPs in folliculogenesis and how follistatin contributes to BMP action, four specific aims are proposed. Aim1: To characterize the BMP system (ligands, receptors, binding proteins) in rat and human ovaries during the estrous and menstrual cycles, respectively. Aim2: To explore the role of BMPs in regulating the cytodifferentiation of rat and human granulosa cells. Emphasis will be placed on exploring the molecular mechanisms by which BMPs regulate steroidogenesis in granulosa cells. Aim3: To test the hypothesis that follistatin modulates extracellular BMP-dependent cytodifferentiation in rat and human granulosa cells in vitro Aim 4: To establish the physiological relevance of BMP functions by testing the hypothesis that BMP is a luteinization inhibitor in vivo. The results of these proposed studies may demonstrate that BMPs are physiologically important luteinizing inhibitors and that follistatin plays a novel role in inhibiting BMP responses in rat and human granulosa cells.